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Tibergien: Sharpen Strategy to Fulfill Your Firm’s Vision

The best-managed advisory firms demonstrate strategic discipline

Every year about this time, I find it prudent to go back to the basics of my business. New assumptions and new challenges have emerged over the course of the year, and upon assessment, I may have found that not everything I set out to do in the current plan was completed. Additionally, competitors may have introduced new innovations or tactics that could threaten my business and new opportunities have likely emerged.

For financial advisors, it’s easy to assume that the business is much simpler and not much has changed over the course of a year. However, experience tells us this is delusional thinking. If your practice is one that is not growing or evolving, chances are the seeds of destruction were planted long ago. On the other hand, if your practice has been going through dynamic change including rapid growth, the risks to your business could be growing exponentially as well. It’s possible your pursuit of growth may have caused you to miss new opportunities. It is even more common that the pursuit of new opportunities may have inadvertently caused you to alter your strategic course.

Key to reviewing the basics is to remind yourself of the framework you created for making strategic decisions in the first place. In other words, what’s your vision for what you want your business to become? Did the choices you make throughout the year move you closer to your vision or detract from it?

For example, assume your stated long-term vision was that you wanted your firm to be recognized as the leading provider of comprehensive wealth management to business owners in your region. However, most of your growth this past year came from a jump in assets from foundations and retirement plans; so much so that you hired two people to support this activity. Would you say that your investment in the business and your deployment of resources moved you closer to your vision or detracted from it? Further, would you say that this dramatic growth may have even changed the strategic direction of your business?

Many advisors would argue, “Who cares? We grew revenue and we have more assets. Does it really matter where it came from?” If you measure success in short-term movement, it probably doesn’t matter. But if you developed your vision and strategy thoughtfully based on a reasonable set of assumptions, then your active pursuit of non-core business is like violating the guidelines of your investment policy statement. If you made the same type of opportunistic decision with client money after agreeing to a strategy, how would you justify it?

Now one thing I am certain about is that entrepreneurs, including financial advisors, tend to recoil whenever they hear “consultant speak” that includes words like vision, mission and culture. As a result, many firms tend to avoid the time-consuming process of strategic planning and the discipline to implement it effectively. Rather, they deal with issues as they arise. That’s just like your clients who want you to implement an investment strategy without going through the process of goal setting or assessment of risk tolerance. The reality is that it takes just as much effort to tread water as it does to execute a business strategy, so why not do the latter?

A refresher

In its simplest form, a well-conceived strategic plan has four stages:

Strategic plan, the process through which you create a vision for what you want your business to become.

Focus, whereby you develop a mission statement that clearly and succinctly articulates what your firm does for whom and how you distinguish your business from others.

Assessment, the process by which you determine strengths, weaknesses, opportunities and threats in light of your vision, and then create specific long-term goals for your firm.

Operating plan, wherein you create specific, measurable, actionable objectives to be accomplished in the next 12 months.

It’s important to grasp the distinction between strategic and operational planning. The strategic plan tells you where you want to go, whereas the operating plan tells you how to get there. The tactical elements of an operating plan have immediate appeal to entrepreneurs because they are action-oriented and designed to create an immediate impact like reducing costs, driving revenue or increasing profits. However, when operating plans are created without the context of strategy, focus and assessment, the result is often muddled and resources are poorly allocated.

Once your plan is in place, it is necessary to have a process for measuring and monitoring your progress against the plan. This step is often missed, which is why so many plans sit on the shelf gathering dust.

Where to Go from here

The business challenge then is to decide which phase you are in. Is it time to refresh your strategy or merely time to assess your gaps vis-a-vis the market and the competition? At a minimum, this is a time to update the plan of action for the next 12 months. What is critical is that the action plan—your specific objectives—is specific and measurable and supports one of the goals you established in your strategy.

Add more clients that increase the average net worth of those we serve

Enhance the risk management processes within our firm

All of these are priorities for your business and each of them will require attention in the coming year. When you create an action plan for the next 12 months, if you come up with an initiative that doesn’t help you move closer to any of these goals, then you should discard it. Be careful! You could easily rationalize the goal of improving profit margins without regard to which types of clients you onboard. You need to test your decisions here to make sure that if you take steps to do one thing, it doesn’t compromise another. For example, improving profit margins without regard to who you do business with could undermine your strategy and force you to misallocate precious resources.

Strategy is not marketing. Marketing is a component of one’s strategy. The development and implementation of a strategic plan is all about resource allocation. So if your vision is to be recognized as the leading provider of wealth management solutions for business owners in your region, then you have a framework for where you will spend your time, money, management and energy.

The goals that you commit to then guide you to build an operating plan that helps you capture the right kinds of clients, develop your staff, improve your profitability, enhance your productivity and protect your firm from damage. A vision for your business that will attract new business, energize you and your staff, differentiate you in the marketplace and produce a reasonable return is the key to transforming from practitioner to business owner.

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